Arkansas to Vote on Diesel Tax Increase

Voters in Arkansas will decide in November whether or not to impose a 5-cent tax on diesel fuel. The initiative, known as the Arkansas Diesel Tax Increase Question and the Arkansas Highway Financing Act of 2011, would be used to fund improvements to roads and highways throughout the state, as part of a larger bond issue.

More specifically, the initiative would “authorize the Arkansas State Highway Commission to issue state of Arkansas Federal Highway Grant Anticipation and Tax revenue bonds for the purposes of constructing and renovating roads and highways for the citizens of the state of Arkansas,” according to the bill’s official summary. The measure will appear on the Nov. 6 statewide ballot.

Arkansas House Speaker Robert Moore, D-Arkansas City, proposed the measure to the state legislature in March of 2011, arguing a need for the improvement of roads and highways. The measure was then placed on the special election ballot by Gov. Mike Beebe in August of 2011.

Shortly thereafter, in one of his weekly addresses, Gov. Beebe stressed the need for such a tax:

An improved interstate system is good for the safety of Arkansas drivers, but it is also vital to our economic-development efforts. It makes our state more accessible for both business and tourism. These bonds will help us pursue those improvements while leaving other highway funding available to help maintain other roads throughout the State.

Not everyone agrees with the governor’s assessment, nor with the initiative in general. The Arkansas Trucking Association originally supported the tax, but later asked the governor to remove the initiative from the ballot entirely. “Our organization has concluded that while this is the right tax, it is the wrong time to ask voters to approve this measure,” said Lane Kidd, president of the Association. The group believes that if voters reject the initiative, the decision may compromise similar tax efforts in the future.

Southwestern Energy, an independent energy company that relies on crude oil and natural gas, has also spoken out against the tax. Mark Boling, the company’s executive vice president and general counsel, told TalkBusiness that his greatest concern in Arkansas is a higher cost of doing business. “The attempt to increase the severance tax at this time – which is a very, very difficult time for folks in the natural gas industry – is going to make it even more difficult for us to continue with the development plans we have.”

Voters have until November to determine whether the initiative is right for them.